Read this today and thought it was a good reminder to focus on the fundamentals, as eventually they dictate what the price will be
A few excerpts:
“Let’s say you had the smarts to buy Microsoft in November 1992. It would have been a brilliant decision in the long run — the software giant’s stock has gone up manyfold since. But nine months later, in August 1993, that call did not look so brilliant: Microsoft shares had declined 25 percent in less than a year. In fact, it would have taken you 18 months, until May 1994, for this purchase to break even. Eighteen months of dumbness?”
"The stock market is a complex system where in the short term there are few if any interdependencies between decisions and outcomes. In the short run stock prices are driven by thousands of random variables. Stock market participants have different risk tolerances and emotional aptitudes, and diverse time horizons ranging from milliseconds (for high-speed traders) to years (for long-term investors).
In other words, predicting where a stock price will be in a day, a month or even a year is not much different from prognosticating whether the ball on a roulette wheel will land on red or black. In the longer run, however, good decisions should pay off because fundamentals will shine through — just as was the case with buying Microsoft in 1992 and not buying GoPro in 2014. But in the short run there is no correlation between good decisions and results. None!"
So the trick is to think about whether a company has actual distinguished traits that will allow it to continue to be a winner. For example, I bought and then eventually sold out of SWKS because it did not seem that they produced a product that is differentiated from other chip makers. I think Shopify provides hands down the best experience for small business merchants, and Facebook (as does Google or Amazon) has an enormous network advantage. Skechers is my largest holding but mostly based on valuation - I’m not sure that it has any noticeable competitive advantage over other shoe makers other than being relatively smaller and possibly having room to grow
Anyways, hope this article was useful